1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 84
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
A weaker yuan has been a tailwind for exports and corporate profits
CNY per 1 unit of foreign currency
10
9
8
7
6
2022
2023
2024
EUR/CNY
2025
GBP/CNY
Source: Bloomberg Finance LP, Scotia Wealth Management
While Chinese officials have pledged additional policy support ahead, they have taken a cautious
stance up until now with the last cut to the 7-day repo rate, reserve requirement ratio, and loan
prime rates occurring in May 2025. Remarks from officials in Beijing indicate that they are in no
hurry to dole out additional stimulus with comments in recent months downplaying weak
household credit demand. Part of the restraint can be attributed to the economy having been on
track to achieving growth of around 5%, which has reduced the urgency to push through a fresh
stimulus package or embark on additional policy easing. However, given the challenges
mentioned earlier and our real GDP growth forecasts which suggest the country may have a
tougher time in achieving its annual growth target in 2026 and 2027, we believe policy cannot
remain complacent for long. Indeed, consensus is forecasting further cuts to the 7-day reverse
repo rate and the require requirement ratio in 2026 as a means for officials to revive domestic
demand.
Chinese officials have kept policy settings unchanged since May 2025 but are expected to ease
further in 2026 and 2027
2.2%
12%
11%
1.9%
10%
1.6%
9%
1.3%
8%
1.0%
7%
2022
2023
2024
7-day reverse repo rate - LHS
2025
2026
2027
Reserve requirement ratio - RHS
Source: Bloomberg Finance LP, Scotia Wealth Management | Dashed lines represent Bloomberg consensus forecasts
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